Pay off car loan or start roth IRA?

Ashishduh · **Joined:** Wed Jan 25, 2012 2:01 pm **Posts:** 10

Hello all.

My wife and I have a car loan of 25k @ 3.25%. We contribute about 12.5k/yr to retirement (401k up to employer match and my Roth IRA up to max).

We have about $600/mo that are unbudgeted. My thinking is that we should open up a Roth IRA for my wife while our income level is relatively low. But I also don't like debt so that car loan is quite annoying.

Any suggestions or things I may not be considering?

stannius · **Posted:** Tue Jan 31, 2012 1:07 pm

That interest rate is pretty low. Sure, it would be nice to get rid of it. But in your list of financial priorities, contributing the max to Roth IRAs should definitely be higher than paying off that loan.

JMC · **Joined:** Mon Jan 02, 2012 3:21 pm **Posts:** 81

Agree with stannius. The Roth IRA is an awesome financial vehicle. Think about how much your wife's $5,000 contribution this year could be worth by the time you guys retire. Weighed against a 3.25% loan, that's the way to go.

frugalcoconut · **Posted:** Tue Jan 31, 2012 6:13 pm

Because you will have some excess funds left over, I suggest contributing up to the maximum on the second Roth IRA and then everything available above that can be put against the auto loan.

Ashishduh · **Joined:** Wed Jan 25, 2012 2:01 pm **Posts:** 10

Alright, I'll start that Roth IRA asap, thanks guys.

Pay off car loan or start roth IRA?

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